Cane Company manufactures two products called Alpha and Beta that sell for $195 and $150, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 123,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials. Direct labour Variable manufacturing overhead i Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Alpha $ 40 34 22 30 27 30 $183 Total contribution margin Beta $15 28 20 33 23 25 $144 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars. 14. Assume that Cane's customers would buy a maximum of 95,000 units of Alpha and 75,000 units of Beta. Also assume that the company's raw material available for production is limited to 245,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?

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Chapter1: Financial Statements And Business Decisions
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Cane Company manufactures two products called Alpha and Beta that sell for $195 and $150, respectively. Each product
uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 123,000
units of each product. Its unit costs for each product at this level of activity are given below:
Direct materials.
Direct labour
Variable manufacturing overhead i
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Cost per unit
Alpha
$ 40
34
22
Total contribution margin
30
27
30
$183
Beta
$15
28
20
33
23
25
$144
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses
are deemed unavoidable and have been allocated to products based on sales dollars.
14. Assume that Cane's customers would buy a maximum of 95,000 units of Alpha and 75,000 units of Beta. Also assume that the
company's raw material available for production is limited to 245,000 pounds. What is the maximum contribution margin Cane
Company can earn given the limited quantity of raw materials?
Transcribed Image Text:Cane Company manufactures two products called Alpha and Beta that sell for $195 and $150, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 123,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials. Direct labour Variable manufacturing overhead i Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Alpha $ 40 34 22 Total contribution margin 30 27 30 $183 Beta $15 28 20 33 23 25 $144 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars. 14. Assume that Cane's customers would buy a maximum of 95,000 units of Alpha and 75,000 units of Beta. Also assume that the company's raw material available for production is limited to 245,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?
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